The third degree

The litigation funding industry has powerful critics, notably the US Chamber of Commerce. It quotes Lord Justice Jackson’s suggestion in his 2010 Final Review that the industry may need statutory regulation if it expands.

Yet Jackson was talking about the industry stretching beyond the commercial sphere – which has not really happened yet. And he was broadly supportive of funding, suggesting this could help small businesses secure access to justice despite losing the ability to recover success fees and insurance premiums. This is now happening, with funders more interested in supporting lower-value claims.

The Chamber also quotes research showing that the public worries British justice is becoming ‘increasingly Americanised’. But there is a crucial difference: the US does not have our ‘loser-pays’ principle, which means it makes no commercial sense for funders to bring litigation unless the merits support a decent chance of success.

Still, just because an argument does not stack up does not mean there is no danger it will prevail. One recalls Jackson’s warning last autumn that the government should not listen to ‘powerful vested interests’ opposing hybrid damages-based agreements. The judge was ignored and ministers ruled out the hybrid DBA within days.